Ocean container spot rates from Asia to US West Coast ports increased 25.6% for the week ending August 30th. This is welcome news for the carriers who have been battling declining spot rates for much of the peak shipping season.
The good news may not last long for the carriers. Industry experts believe this sharp increase in spot rates will quickly fade away unless there is a clear-cut uptick in cargo over the next eight weeks. The sharp increase is not the result of more cargo driving rates up but a planned September 1stgeneral rate increase. The threat of tariffs played a major role in driving spot rates last year. The same tariff threats are in place, but they seem to be having minimal impact on spot rates this year.
Another major reason why the spot rate increase is likely to evaporate is space. Unlike the 2018 peak shipping season, space is available for shippers that utilize the spot rate market. As long as space remains available during peak season, it will be difficult for the carriers to sustain any type of meaningful increases to the spot rates. The projections for containers shipped in September and October do not bode well for the carriers. September is projected to be 1.1% lower and October to be 6.2% lower than the same months last year.
Carriers are aware of the gloomy projections for container shipping and are concerned. Last year the carriers pulled capacity from the market to prop up rates. They have resisted pulling capacity this year, instead opting for cancelling (blanking) sailings to keep rates from tanking. Eight blank sailings have already been announced for the month of October targeting both US West Coast and US East Coast ports. Additional blank sailings are expected if the container projections for the remaining peak shipping season hold true.
The carriers are still hoping a late peak shipping season to bolster their bottom lines will materialize. Unfortunately, inventories for the major US retailers remain very high making the chances for a surge in container shipments highly improbable.